Earlier this month, Qatar based Baladna Food Industries entered into a MOU with Felcra Berhad of Malaysia for setting up the largest dairy farm of Malaysia in the next two years (with 10,000 heads capacity targeting annual production of 50 million litres). Baladna is one the largest dairy farm owners in Qatar and would bring its investment, expertise and technology to Malaysia. This is one of the latest foreign investments in food sector in Malaysia in recent times.
As per Malaysian Investment Development Authority (MIDA), the agriculture sector is expected to grow at 3.5% per annum and is expected to contribute 8.2% to total GDP under the Eleventh Malaysia Plan (2016–2020). The food-processing sector account for almost 10% of Malaysia’s manufacturing output and processed food products are exported to more than 200 countries around the globe. There are more than 8,000 establishments in food processing and related sectors, mainly dominated by Malaysian SMEs. The main industrial crops of Malaysia include oil palm, rubber, cocoa, tobacco and pepper while other crops include paddy, fruits, vegetables and coconut.
Malaysia, one of the tiger economies of Asia has been recognized as one of the best destinations for foreign direct investment (FDI) in Southeast Asia. The inflows of FDI upgraded Malaysia from being an agriculture-based domestic-centric economy into an industrialised export-oriented nation. The country offers a dynamic and vibrant business environment with the ideal prerequisites for growth and profits including in the food sector. FDI accounts for 40% of overall investments in Malaysia. In the last 3 years, USA, China, Japan, Australia and Germany have accounted for maximum FDI inflows into Malaysia.
The trade war creates a unique opportunity for Malaysia and the shift in the global supply chain investments has witnessed approved FDI increasing by 47% to RM 80.1 billion in 2018 from RM 54.4 billion in 2017. The new National Committee on Investment, jointly chaired by the Minister of Finance and the Minister of International Trade and Industry has been set up to fast-track and provide expeditious clearance of investments in light of the ongoing trade war. Focus is also being given to post-approval investment monitoring and realisation. A new incentive framework is being worked on and is expected to be announced by January 2021.
MIDA encourages investors to take advantage of opportunities in the advancing level of technology, as well as improving R&D activities in food sector of country. The 2020 budget lays special focus towards enhancing incomes of farmers and allocates funds for Agriculture Industry 4.0 to develop new crop varieties with higher productivity and quality.
The prominent food companies that have invested in Malaysia in food sector include Nestle, Fonterra, Ajinomoto, Mondelez, Coca-Cola, Dewina Food Industries Sdn Bhd, Charoen Pokphand Holdings, and Kerry Ingredients.
We highlight below opportunities for investors in specific sub-sectors:
- Palm oil: Malaysia is world’s second largest exporter and producer of palm oil. Malaysia and Indonesia account for more than 84% of the world’s palm oil output. Malaysia fulfils the global need for edible oils and fats. MIDA helps in attracting foreign investments into the production of higher value-added palm oil based products like production of food substances, food ingredients, food additives, and nutraceutical products. Major foreign markets for oil palm products are India, Europe, China, Pakistan and Philippines.
- Halal food: The global halal food market is estimated at US$2.3 trillion and Malaysia’s large muslim population opens up a large domestic market for halal food. Malaysia has evolved as an international halal food hub and provides immense opportunities for international food processing players.
- Livestock and Dairy: Malaysia’s poultry processing constitutes 60% of the meat processing industry. Malaysia is a leading exporter of poultry meat. The livestock & dairy sector provide substantial opportunities for investors who wants to further process easily available raw material in country.
- Chocolate: Malaysia is the eighth largest cocoa processing country in the world. Malaysia is a leading exporter of cocoa products including chocolates, exporting to more than 90 countries.
- Food Ingredients: Malaysia food flavours, additives, colouring, seasonings and palm oil-based additives offer vast potential for further development specially from export perspective to the USA, the UK, Japan and Australia.
Select foreign investments in food sector in Malaysia
- PE firm Navis Capital expands in Malaysia with acquisition of durian company Hernan corporation.
- Nestle Malaysia’s is investing in development of Milo Manufacturing Centre of Excellence
- Fonterra, a dairy company based in New Zealand, has increased production at its dairy plant in Subang Hi-Tech Industrial Park, Selangor, Malaysia, by 50%
- Samyang Foods of South Korea has signed agreement with Malaysian FGV Holdings to establish a halal ramen manufacturing plant in Malaysia.
- Ajinomoto of Japan, opens a new manufacturing facility in Bandar Baru Enstek, Malaysia